Customers Outraged at New Netflix Pricing, Investors Giddy
July 14, 2011 12:30 PM
comment(s) - last by
The price hike and change in service plans are not sitting well with many Netflix customers, but Netflix already knew this would happen
Two days ago, Netflix announced that it would
change its pricing and plans
associated with its DVD rental and video streaming services. These changes include separating DVD rental from video streaming entirely, charging $7.99 for one or the other. For both, the cost is $15.98 (the current price for one DVD out at a time and unlimited video streaming is $9.99).
The price hike and change in service plans are not sitting well with many Netflix customers, but Netflix
already knew this would happen
. In fact, one day before announcing these plans, Netflix told customer service representatives to be prepared for angry callers.
Today, the company even increased the number of personnel in the department to handle the amount of phone calls they've received. "Hundreds" of Netflix employees have been answering phones, and this still caused some callers to have to wait to speak to an employee. The sales representatives have said that many of the calls have been "emotional."
"We tested, we researched, we analyzed," said Netflix spokesman Steve Swasey. "We knew what the reaction would be. We are not surprised. We knew that there would be some people upset by the service and with the price being adjusted."
According to Rich Greenfield, a Wall Street analyst with BTIG Research, Netflix employees have not been giving callers satisfactory responses through the day. Greenfield tested how Netflix's service department was handling the flood of calls by making over 35 calls over a two-hour time period, and said that Netflix employees simply tell customers (who threaten to cancel their subscription) to wait to cancel until September when the new plans/pricing takes place.
"There was simply no promo or 'save' technique to offer us a discount to
retain our business
," said Greenfield. "This would appear to illustrate that Netflix is simply not concerned with the prospect of losing customers."
In addition, Greenfield said he waited on hold for about 9 to 15 minutes while making these calls.
While customers are up-in-arms,
investors are salivating
at the Netflix price rise. According to Ingrid Chung, a Goldman Sachs analyst, the higher prices will make up for the cancellations by "driving customers toward more profitable Netflix plans."
"Gross margins should benefit as we believe that the majority of lower-priced (subscribers) were less profitable for Netflix," said Chung.
Chung also mentioned that "lower-priced subscribers" may be drawn to the streaming-only service as well, which could prove to be a successful shift.
Netflix shares increased three percent yesterday after the announcement of the new plans.
This article is over a month old, voting and posting comments is disabled
RE: who cares
7/14/2011 1:40:07 PM
You are being kind of simple minded. They have done a couple of price hikes through the years. My original subscription was for 16.99, now I was paying $23. With this hike I am increasing a service by the amount mine have increased in 10 years in 1 month. It not just about the actual cost but incredible increase in general.
You wonder why none state approved Monopolies are illegal, this sets the table for it. These are the practices they are afraid that will happen. A company out-prices competition, to the point where the last real competitor files for bankruptcy and then increases prices "for better sustainability". Now I am keeping streaming to see if this drastic increase is to push streaming as a standalone.
But if this is just an act of more profitability in a low competition environment, within months I will cancel the subscription that I have had since 2000 completely.
RE: who cares
7/14/2011 2:00:54 PM
Simple minded maybe, but also pointing out that even with the new price the deal is better than what was available even a few years ago for most people.
I can stream three movies per month now and have paid less than what I did a few years ago renting the same three movies from Blockbuster or Movie Warehouse and I don't have to worry about a wasted trip there to find out it is out of stock or calling ahead to reserve a copy for the night. For everyone else here maybe this is some huge increase in their entertainment budget, but for me even if I got the streaming and DVD option I would still be spending less than I used to if I rented a couple movies each week.
I do think it will eventually go higher on pricing. The MPAA and the movie studios would love to make as much from each viewing of a movie as they do at the box office or each sale of a DVD so they will push and push until they find the max they can gouge the consumer for. Netflix is just getting ahead of the curve on future pricing increases they know are coming from the studios. No one else is offering a better service and pricing because I imagine they would not get the pricing contracts that Netflix has had for so long.
RE: who cares
7/14/2011 2:52:25 PM
Again on an entertainment per dollar its not bad. But its a bad and whether or not you mind the price hike an evil practice to price your competitors out of business and then start hiking up the prices.
"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer
New Netflix Plans/Pricing Announced
July 12, 2011, 7:21 PM
Netflix Gobbles 29.7 Percent of Peak Downstream Traffic in North America
May 18, 2011, 6:24 AM
Report: New UK Broadband Users Give Porn Filters the Shaft
July 23, 2014, 11:49 AM
Comcast Memo: Harassing Customers During Retention Calls Actually IS Our Policy
July 22, 2014, 5:19 PM
Aereo Now Claims It's a Cable Company, Reveals it Has Very Few Customers
July 22, 2014, 4:20 PM
Edward Snowden Presents Tech to Stop Government Spying
July 21, 2014, 12:00 PM
Verizon FiOS Network Upgrade Brings Symmetrical Upload/Download Speeds
July 21, 2014, 8:33 AM
Amazon Launches First Fire Phone TV Spot, Spends 30 Seconds Promoting Prime
July 18, 2014, 11:17 AM
Most Popular Articles
Microsoft Kills Entertainment Unit, May Shelve Flagship Lumia "McLaren"
July 18, 2014, 7:40 PM
Boeing 777 Malaysian Airlines Flight 17 Crashes in Ukraine
July 17, 2014, 1:00 PM
Google Signs Controversial Deal With Pharmaceutical Giant Novartis
July 16, 2014, 7:32 PM
Toyota Scientist: Autonomous Vehicles May Lead to Increased Fuel Consumption, Pollution
July 18, 2014, 2:42 PM
JJ Abrams Unveils X-Wing Starfighter for New "Star Wars" Movie
July 21, 2014, 12:24 PM
Latest Blog Posts
Space Terrorism is a Looming Threat For the United States
Apr 23, 2014, 7:47 PM
Facebook Aims to Provide Internet to "Every Person in the World" with Drones, Satellites
Apr 1, 2014, 10:20 AM
Retail Mobile Sites Experience Outages in Light of Simplexity's Bankruptcy
Mar 14, 2014, 8:48 AM
Tesla vs. BMW: Who Has the Safer EV?
Feb 1, 2014, 2:56 PM
Justice Leaks Details of Next HTC One Two Flagship Phone
Dec 5, 2013, 4:04 PM
More Blog Posts
Copyright 2014 DailyTech LLC. -
Terms, Conditions & Privacy Information